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Tiller investor update: February 2019

 

Most stock market indices were up in February, driven by a combination of improvements in the US/China trade talks and the US Federal Reserve suggesting they would be more patient with interest rate increases.

The Chinese stock indices had a notably strong month. This was boosted by additional stimulus measures implemented in China and the news that the weighting of Chinese-listed shares would be increased in the widely followed MSCI Emerging Market index. This second measure should mean an increase in global investors allocating to Chinese shares.

On the downside – Japanese equities (once converted back to sterling) made a small loss. Our small position within portfolios meant this had a limited impact.

Within the UK bond market, the prices of government bonds fell as yields rose (yields move inversely to price). As a result, ETFs tracking the UK government bond index fell by roughly 1% in February.

This trend was in evidence globally as a lot of government bond markets saw yields rise. The Barclays Global Aggregate (a widely followed global bond index) was down 0.6% in the month. Lower risk portfolios that tend to hold more bonds than equities were most affected by this.

As the Tiller portfolios do not have a lot of government bond exposure, this did not have a big impact.

February was overall a good month for the active managers used within Tiller’s ‘Smart’ and ‘Select’ portfolios. The RWC Emerging Markets fund continued its strong relative performance in 2019. February saw it rise by 4.5%, when the passive equivalents were broadly flat.

Steady performance was also seen from the ‘Alternatives’ asset class. We see this asset class as a way of diversifying portfolios without adding more bond exposure. In February the majority made low single digit returns, while bonds fell.

In ‘Smart’ and ‘Select’ portfolios, the Merian UK Mid Cap fund and the Jupiter Absolute Return fund (which had been the standout performer in the down month that was December 2018) posted small losses.

March should bring more developments on the Brexit process. Our current portfolio positioning still ensures that should there be a sudden rally in the value of sterling, impact on portfolio performance would be limited.

 

 

Disclaimer:
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